Hotelbeds Group executive chairman Joan Vila believes that the group now has the global scale to give hoteliers a viable distribution alternative to Expedia Inc and Priceline Group.

Vila talked to tnooz about Hotelbeds’ growth plans now that its takeover of GTA – announced this April – passed all regulatory requirements. Earlier in the year, Hotelbeds also bought Tourico Holidays with that deal completing in June.

“We are a relevant size now to be able to challenge [Expedia and Priceline] in terms of our size, service and technology, which gives hoteliers an alternative route to market, globally,” he said.

“We are now able to match [Expedia and Priceline] in terms of our size, service and technology, which gives hoteliers an alternative route to market, globally,” he said.

(UPDATE 20:30, 4/10/17 original quotation edited for accuracy)

Hotelbeds was sold by Europe’s biggest tour operator TUI in April 2016 for €1.2 billion ($1.3 billion). The buyers, Cinven and the Canadian Pension Plan Investment Board (CPPIB), identified market consolidation and economies of scale as sources of future growth for the business in the official announcement at the time.

It noted:

“Market consolidation opportunities in Europe, Middle East, Asia and the Americas given customer demand for wider bedbank portfolios and market fragmentation; potential for further profitability improvement through economies of scale.”

The consolidation has required significant investment from Cinven and CPPIB, with industry sources suggesting that the combined price paid for GTA and Tourico was in the region of €1.3 billion. A post from Phocuswright at the time of the GTA deal suggested a combined TTV for the three business of around €8 billion a year.

The integration of all three businesses into a combined platform – based on the existing one used by Hotelbeds but integrating features from GTA and Tourico – can now begin in earnest. Work integrating Tourico is already under way, with Vila confident that the core functions will all be aligned within 18 months.

“We want to make sure that we keep the best technology and talent from GTA and Tourico and use that to build a new team across the board, almost becoming a new company with a new platform.”

Brand dilemma

The business is undecided about the future of the GTA and Tourico as standalone brands. The B2B specialist now has a few consumer-facing businesses as well, such as GTA’s Travelcube and Travelbound. Vila said these are only “a tiny part of the business….They are more of a support channel for B2B than consumer brands in their own right but we’ll keep what we have if it makes sense”.

The end result of buying two of its main competitors is that Hotelbeds has strengthened its market leadership position while extending its global footprint. GTA supplements its supply and client roster in APAC while Tourico powers its presence in the Americas. Vila said that the combined business is now bigger than Expedia Affiliate Network in North America.

Sources believe that the combined Hotelbeds Group now has around 15% of the global B2B hotel market, way ahead of its nearest competitors.

Vila said Hotelbeds is now looking to “leverage its dominance, and the most evidence you will see is that we now have an even bigger budget for technology so we can work better with clients and suppliers.”

Less evident, he said, is the wider implication of Hotelbeds now having even greater scale in the fragmented hotel distribution market. He noted that Expedia and Priceline have taken advantage of that fragmentation and have disproportionately benefitted from the natural market growth by effectively becoming the only option for hoteliers looking to sell to a global online audience.

“We can compete with them now,” he insisted. “We are different from Expedia and Priceline in that we are not necessarily competing directly with the hotels in the same way that they are. We are also hearing concerns from hoteliers about their being forced to work with EAN. We know hoteliers are, generally speaking, quite conservative and we are pushing ourselves as a way for hotels to derisk their distribution channels.”

Having bought two businesses in quick succession, Vila acknowledged that further M&A is not on its immediate radar. “There’s enough on the table and the integration of three businesses – the tech, teams, content, customers – is a major challenge,” adding, “later, we’ll see.”

Executive decision

Meawhile, Hotelbeds Group has made a number of senior appointments in response to GTA officially joining the group. Of particular interest is its appointment of Jose Antonio Tazon as a senior non-executive director and chairman of its advisory committee.

Tazon’s travel tech CV includes nearly 20 years as president and CEO of Amadeus from October 1990 to November 2008. He was in the driving seat back in 2005 when Amadeus was “taken private” in one of the biggest moves of its kind ever seen in Europe. The €4 billion plus deal was led by BC Partners and Cinven.

Cinven did remarkably well out of its Amadeus investment. Amadeus was relisted on the Madrid exchange in 2010 and when Cinven sold its final stake a year or so later it said it had “generated 7 times its original investment in Amadeus.”